A couple of years ago I resigned from a client operating via a limited company. The company veered from one crisis to another, and would only pay their outstanding bill when the next crisis came along and they needed my help. Then, of course, everything was urgent and they expected me to drop my other work and help them out immediately.
I got very bored of this happening and resigned. I knew at the time they would use this as an excuse not to pay their outstanding bill, but I was prepared to accept this loss.
It didn't come as a massive shock when I received a letter from an Insolvency Practioner to say the firm is now in liquidation. The firm still owes me money, so I informed the liquidator of the amount owed.
The liquidator has now come back and asked for further information on the accounts I prepared for this hospital-pass of a client several years ago. I don't want to be unhelpful, but I have no hope of being paid the money owed, and the last thing I want to do is spend more time on an ex-client I paid money to get rid of.
Is there any legal requirement to provide information to the liquidator? Or can I get on with some work I might actually get paid for?
Replies (25)
Please login or register to join the discussion.
Answer nothing
Tell him your rates for supplying the information and engage him accordingly.
You have to provide the info
the liquidator stands as the directors from the point of appointment.
Anything the directors have right to, the liquidator has right to.
In addition, the liquidator can ask you to answer any questions that help them to understand what's happened.
They have lots of powers to enforce this if they want to and you have no right to get paid for this.
Work for no payment?
the liquidator stands as the directors from the point of appointment.Anything the directors have right to, the liquidator has right to.
In addition, the liquidator can ask you to answer any questions that help them to understand what's happened.
They have lots of powers to enforce this if they want to and you have no right to get paid for this.
Enforce what they want, all liquidators who have approached my firm are told any information or advise given is chargeable. We're not a charity. End of.
@bigmugsy
I applaud your stance.
Sadly we've had a bad experiance with adopting the same.
The liquidator in question took us to court saying:
"The other is legal entitlement resulting from inter alia Section 235(3)(c) of the Insolvency Act 1986. Therefore even if you were correct as to matters of ownership you have a duty to cooperate with me pursuant to Section 235 of the Insolvency Act 1986. I would additionally refer you to Section 235(5) of the Insolvency Act 1986 which states as follows:
If a person without reasonable excuse fails to comply with any obligation imposed by this section, he is liable to a fine and, for continued contravention, to a daily default fine."
He won, made us pay large costs and then do masses of work unpaid.
Think it greatly depends on the liquidator you're dealing with.
James
Clarification
What are they asking questions for? Establishing your entitlement as a creditor or information to assist with the liquidation.
If the former I would just send a copy of the outstanding bill and copies of the accounts/work charged for with no more detail.
If the later I think James is right and you have to co-operate with the Liquidator as far a reasonably possible.
provide information
I don't think you have to do more than provide information that you already have.
For example, if he's asking for analyses that you don't have but would have to spend time putting together, I think the answer is "that information is not on my files".
Make them visit your office...
I came across this problem in the past. ACCA Technical Advice told me to reply saying that there was a working papers file at my office and if they wanted to come and inspect it and draw their own conclusions then they should book an appointment.
However if they wanted me to prepare any information for them then there would be a cost involved which we should agree in advance and I should be paid in advance for.
Duty to cooperate
To reiterate what previous answers have said, the law imposes a duty on you to cooperate with the liquidator. If you don't then they can take you to Court and you will lose and have to pay costs. Whether they will actually take you to Court or not is up to them, but don't expect to get any sympathy from a judge. This is a bone of contention for accountants, but the reason why the law provides for this is obvious - liquidators come in cold to step into the shoes of the directors in a winding up and need access to information on the company in order to realise assets for the benefit of creditors and investigate how the company has been managed. If people could simply refuse to provide them with information, it would be open season for unscrupulous or incompetent company directors.
Agree
To reiterate what previous answers have said, the law imposes a duty on you to cooperate with the liquidator. If you don't then they can take you to Court and you will lose and have to pay costs
. Whether they will actually take you to Court or not is up to them, but don't expect to get any sympathy from a judge. This is a bone of contention for accountants, but the reason why the law provides for this is obvious - liquidators come in cold to step into the shoes of the directors in a winding up and need access to information on the company in order to realise assets for the benefit of creditors and investigate how the company has been managed. If people could simply refuse to provide them with information, it would be open season for unscrupulous or incompetent company directors.
I'm sorry I appreciate its the law and we as a business completely respect it but if a liquidator doesn't respect our position and demands time then we'd simply email 'no records held'. No one should work for free.
Contradiction?
To reiterate what previous answers have said, the law imposes a duty on you to cooperate with the liquidator. If you don't then they can take you to Court and you will lose and have to pay costs
. Whether they will actually take you to Court or not is up to them, but don't expect to get any sympathy from a judge. This is a bone of contention for accountants, but the reason why the law provides for this is obvious - liquidators come in cold to step into the shoes of the directors in a winding up and need access to information on the company in order to realise assets for the benefit of creditors and investigate how the company has been managed. If people could simply refuse to provide them with information, it would be open season for unscrupulous or incompetent company directors.
I'm sorry I appreciate its the law and we as a business completely respect it but if a liquidator doesn't respect our position and demands time then we'd simply email 'no records held'. No one should work for free.
The duty is to provide information you hold, not to do additional work. By saying you hold no records when you do, you're not respecting the law or acting professionally, in my view.
A bit dangerous..
I'm sorry I appreciate its the law and we as a business completely respect it but if a liquidator doesn't respect our position and demands time then we'd simply email 'no records held'. No one should work for free.To reiterate what previous answers have said, the law imposes a duty on you to cooperate with the liquidator. If you don't then they can take you to Court and you will lose and have to pay costs . Whether they will actually take you to Court or not is up to them, but don't expect to get any sympathy from a judge. This is a bone of contention for accountants, but the reason why the law provides for this is obvious - liquidators come in cold to step into the shoes of the directors in a winding up and need access to information on the company in order to realise assets for the benefit of creditors and investigate how the company has been managed. If people could simply refuse to provide them with information, it would be open season for unscrupulous or incompetent company directors.
In my opinion thats a bit dangerous. As someone said, the liquidators operate as the directors do. If you went to a client which asked a query on the accounts and you send a reply 'no records held', then as a director i'd be a bit miffed and wonder if you did something you werent supposed to.
I would think you had a duty to provide 'reasonable' papers and breakdowns if requested. Those papers should be there naturally as a result of work undertaken in the course of your activities.
Who is paying the liquidator and why is the accountant not allowed to charge if the liquidator can charge?
What kind of questions were you asked James and Mabzden?
This is all quite scary.
DLA
Liquidators seem to be very keen on the DLA - if they can prove it's overdrawn - it's a good target as a debtor and also they can get some more "points" for a disqualification order, if the director has not been acting correctly.
If the account was agreed with the director when the last accounts were drawn up, then you should have no problems in simply disclosing it to the liquidator. If not agreed the ex client could argue that he was not informed - but that's another ball game.
Who has the right to ask for records ?
This opens another question for me. I have an ex client involved in a court case at present. Two of my clients are involved in an employment case. I gave notice to both clients as soon as the dispute started as I saw working for both could be a conflict of interest. A year on I hear that there is a court case about to start and am half expecting to be asked for details for the case. Who is legally able to insist I give out any details reference an ex client ?
Provide limited help
My experience of liquidators is they will be trying to maximise the return to the creditors which involves spending a lot of money on their own fees, solicitors fees and if needed accountants fees all of which comes out of money recovered prior to distribution to creditors. They will have a band of 'partners' to assist in this work.
You need to provide the information requested, files etc., but they can either pay you for any additional analysis work or put in one of their partners to do it.
In my experience you have no obligation to provide any other assistance without payment. Would they for example expect one of the other creditors to proved one of their services or products without payment?
Well
Luckily, I've never had any hassle from liquidators. I did send the Insolvency Service a bill for £50 a few years ago for providing information, they moaned about it but paid it.
All the other clients that have gone bust on me I have referred to a friendly IP I know who has always been happy to include my o/s fees in his charges to the client for dealing with the liquidation...
I then have no issue with providing information as the client has "paid" for everything I did for them and I am providing the information to the liquidator for no charge, which I believe is legally what I am supposed to do...
Sorry! It's a pain but ...
See the case of Jackson v Baker Tilly. As an Insolvency Practitioner (obviously much-maligned by several contributors - it's OK, I have a fairly thick skin), I often have very little information when appointed to a case. I quite agree with those who suggest that you shouldn't be asked to do vast amounts of extra work without being paid for it, but is it really so unreasonable to ask you to produce your file, or extracts from it? After all, all we're trying to do is establish whether there's any wrongdoing by the directors which may result in more funds becoming available for creditors, and that includes you.
As for the cynics who imagine that IPs do all this just for the sake of it ... I can speak for no-one but myself but I can assure you that I really do have better things to do with my life than wade though accountants' files for fun.
Duty to assist the Liquidator
The answer to the question is that there is usually in this context, a legal duty to provide information to the liquidator. Subject to the particular facts of the case, matters of oppression and the control of the Court; there is often little doubt about that position.
There is a public duty to assist the liquidator and the information is usually reasonably required. Pleading a case of slavery as grounds for non-cooperation is unlikely to be well received. Section 246 of the Insolvency Act 1986 invalidates most (but not all) liens in any event.
Clients instruct accountants to do this statutory compliance work because they do not want to or do not have the skills to do it themselves. Therefore tendency to refer the liquidator back to the client is often unhelpful. You are not usually required to do any further work but to provide that which you have done, to enable the liquidator to reconstruct records and reconstitute knowledge of the company.
I routinely request a comprehensive set of information in such a capacity and often the issues raised in this thread are submitted to me. This often just delays the inevitable, leading to more work for all involved. It is usually simpler for the information to be provided than descend into discussions on the finer points of the case law and that of the entitlements flowing from Sections 234 and 235 of the Insolvency Act 1986. It is in fact usually not a very time consuming task for someone to just handover files, data and emails.
It is also often overlooked that the accountant can be the tax agent for the client and if so many of the documents can be property of the client in any event. There is unlikely to be a reasonable basis for refusing to deliver up the same to the liquidator if it is property of the client in liquidation. Interestingly enough many people in my experience seem to assume all the papers that they bundle together in their so-called working papers are their property and adopt a possessive approach. Why is the question I have to ask? To whom is the duty of confidence owed? Even if the professional does own some of the information, that information is information about the company, not about the professional.
@Elliot
The answer to the question is that there is usually in this context, a legal duty to provide information to the liquidator. Subject to the particular facts of the case, matters of oppression and the control of the Court; there is often little doubt about that position.
As the liquidator, what would your response be if the accountant gave the reply suggested above, namely "ACCA Technical Advice told me to reply saying that there was a working papers file at my office and if they wanted to come and inspect it and draw their own conclusions then they should book an appointment.
However if they wanted me to prepare any information for them then there would be a cost involved which we should agree in advance and I should be paid in advance for."
In other words, if the liquidator/administrator is stepping into the shoes of the director, is the accountant able to charge the rate s/he would have charged the director?
Inspection and Charging
My response would be as follows:
1. ACCA is a regulator and in my experience they usually issue guidance on these matters; they are not the bodies with legal oversight. That role is reserved for the Court.
2. Inspection at your offices is disproportionate. I would say that an invitation to inspect is an approach that will in all likelihood put the company in liquidation to greater expense than that of delivery up. Invitation to inspect does not overcome requirement for delivery up where ownership is not that of the accountant.
3. Claiming ownership of everything so as to deny the lawful owner possession could involve misrepresentation and even possibly other wrongful scenarios that could be undesirable.
4. Liquidator is not just stepping into the shoes of the former Directors. Section 235 of the Insolvency Act 1986 creates a duty to cooperate and as shown in Re Harvest Finance Ltd (In Liquidation); Jackson and another v Cannons Law Practice LLP and others [2014] EWHC 4237 (Ch) you are not entitled to charge your way out of statutory compliance.
Suppying information re. ex-clients
Not directly linked to liquidators but to the new accountant appointed by ex-client. I accept that we all win some / lose some; and usually I have no problem forwarding the standard information requested.
However, in a current situation I have a client who is leaving with a bad taste in my mouth; let alone work not paid for. ( to explain, a lot of work for new client which I was hoping to recoup in follwing years but not invoiced; yes soft on my part and we never stop learning ).
Has anyone charged the new accountant for supplying the standard fare of information ?
@mabzden
I was looking for just this type of feedback. Thanks. I wasn't going to make a charge but wondered if anyone ever had.
As I said, you win some, you lose some. In this case I spent a lot of time setting up better recording of income and expenditure - and even input work for the first month of the following financial period. Won't do that again. I guess we never stop learning.